Does the Timing of Retirement Distributions Matter?
Modeling results suggest it may not—but real-world tax and spending dynamics tell a more complicated story.
This post examines a long-standing rule of thumb in retirement planning: spend traditional assets before Roth. Using a simple, steady-spending model, the results show that timing alone—Roth first or Roth last—barely changes how long the money lasts.
But retirement doesn’t happen in a vacuum. Real-world forces like RMDs, Medicare surcharges, Social Security taxation, mortgage debt, and shifting spending needs can all tilt the balance. The analysis that follows separates what’s true in theory from what actually matters in practice.
Introduction:
For decades, financial planners have preached a simple rule: Spend taxable money first, traditional IRA/401(k) next, and touch the Roth last. The logic: Roth money grows tax-free, so don’t spend it until you must.
But a time-value-of-money lens tells a different story. If deferring taxes is good, then perhaps retirees should avoid taxes altogether early on—withdrawing just enough from traditional accounts to use the standard deduction and funding the rest from the Roth.
However, spending needs and taxes are affected by multiple outcomes some of which dictate more early spending from the Roth account on retirement and some of which suggest the retiree should economize on Roth assets.
Key Findings
Expert consensus: Spend traditional assets before Roth to preserve tax-free growth.
Modeled reality: With equal starting balances and constant real after-tax consumption, both Roth-first and traditional-first strategies last about 22 years.
Interpretation: Roth-first looks better early (lower taxes, higher mid-retirement balances). But once the Roth is gone and the retiree must draw fully from traditional accounts, the higher taxable withdrawals erase the advantage. The simple model, which assumes constant real spending suggests the timing between Roth and conventional distributions are not highly important.
· Real-world reality: Once you introduce the complexities of actual retirement—RMDs, Medicare surcharges, Social Security taxation, mortgage debt, healthcare costs, or estate goals—the “best” strategy becomes personal. Some retirees benefit from spending Roth funds early to smooth taxes and cash flow, while others gain by saving Roth balances for flexibility in later years.
Modeling Note
This analysis uses a simplified, deterministic model to illustrate how withdrawal order affects after-tax wealth over time.
Assumptions:
Total wealth: $1,000,000 (half traditional, half Roth)
Retirement horizon: 25 years (age 65 → 90)
Real rate of return: 3% (≈ 5% nominal)
Inflation rate: 2%
After-tax spending: $60,000 per year, constant in real terms
Tax structure: 2025 single-filer brackets, standard deduction $15,000
RMDs: Ignored (voluntary withdrawals only)
The model holds real after-tax consumption constant. When Roth assets are depleted, spending continues from traditional accounts, with withdrawals adjusted to maintain equal after-tax consumption each year.
The results are designed for conceptual illustration only. They omit market volatility, tax law changes, and behavioral adjustments. However, they capture the essential trade-off between (1) deferring taxes as long as possible and (2) maintaining Roth balances for flexibility in managing taxable income and marginal tax rates over time.
Why It Still Matters in Practice
The real world is never friction-free. Several interlocking tax effects and life events can tilt the balance back toward the conventional “Roth-last” ordering.
Required Minimum Distributions (RMDs)
When Roth assets are exhausted early, your traditional IRA continues compounding and can grow large enough that RMDs push you into higher tax brackets later in life.
Because RMDs are based on account size and life-expectancy tables—not spending needs—they can force unnecessary taxable income.
Keeping some Roth balance into later years gives you flexibility to draw tax-free income and reduce mandatory taxable withdrawals.
Timing: Rises sharply after age 73.
Tax effect: Moderate to high for retirees with large traditional balances.
Implication: Save Roth for later to manage income spikes and reduce forced taxable withdrawals.
Medicare IRMAA surcharges
Large taxable withdrawals, especially from traditional IRAs, can push modified adjusted gross income (MAGI) above the Medicare IRMAA thresholds. Crossing these limits increases Part B and D premiums by hundreds or even thousands per year.
Maintaining Roth reserves lets retirees meet spending needs without inflating MAGI, helping to stay below those surcharge cliffs.
Timing: Usually begins around age 65 and can persist for life.
Tax effect: Moderate for middle-income retirees; high for wealthier households.
Implication: Save Roth for later to smooth MAGI and avoid IRMAA surcharges.
Social Security taxation
Traditional withdrawals count toward provisional income, which determines how much of your Social Security benefits become taxable.
Since the thresholds for benefit taxation have been frozen since the 1980s, even moderate inflation gradually exposes a larger share of benefits to tax.
Drawing more income from Roth accounts can prevent this “tax creep” and preserve more after-tax Social Security income.
Timing: Becomes important once benefits begin—typically age 62–70—and worsens over time as inflation pushes income above static thresholds.
Tax effect: Moderate but persistent; compounded by inflation.
Implication: Save Roth for later to reduce benefit taxation and control lifetime effective tax rates.
Related reading: Roth IRAs as an Inflation Hedge in a World of Frozen Social Security Tax Thresholds — how even a modest Roth allocation (10%) can meaningfully lower both direct and indirect taxes as inflation amplifies Social Security taxation.
Married vs. single filing
Married couples enjoy roughly double the standard deduction and wider brackets, so moderate traditional withdrawals or RMDs can often be absorbed without jumping into higher rates.
This means RMDs and traditional-first drawdowns are less punishing while both spouses are alive.
Timing: Advantage lasts as long as joint filing continues.
Tax effect: Moderate but persistent.
Implication: Either neutral or slightly favors spending Roth later, since married couples can absorb more taxable income early without penalty.
Widowhood and the “widow’s penalty”
After one spouse dies, the survivor often has nearly the same income but must file as single, cutting bracket thresholds roughly in half and shrinking the standard deduction.
The same RMDs or traditional withdrawals that were harmless under joint filing can now push the widow into higher marginal rates and even Medicare surcharges.
A remaining Roth balance provides flexibility—allowing the survivor to meet expenses without inflating taxable income, softening that tax-rate shock.
Timing: Begins immediately upon the death of one spouse.
Tax effect: High for widows with substantial IRA balances.
Implication: Save Roth for later to provide flexibility during widowhood.
Mortgage debt early in retirement
Retirees who enter retirement with a mortgage or other large fixed payments often benefit from drawing on Roth funds first.
Using tax-free Roth withdrawals to cover debt payments avoids inflating taxable income during years when expenses are temporarily elevated, smoothing lifetime taxes.
Timing: Concentrated in the first 5–10 years of retirement.
Tax effect: High; taxable IRA withdrawals to cover mortgage payments can sharply raise AGI.
Implication: Spend Roth early to offset high early fixed expenses and avoid bracket creep.
Related Reading As shown in Impact of Mortgage Debt on Longevity Risk, a retiree bringing a mortgage debt in retirement must often spend more and minimize taxes by immediately distributing funds from the Roth.
Healthcare costs and long-term care expenses
Large medical or long-term care deductions can create low-tax years late in life. In those years, it may make sense to draw from traditional accounts instead of Roths to take advantage of temporarily reduced tax rates.
Thus, preserving some traditional balance for those deductible years can be more efficient than spending it early.
Timing: Typically, later in retirement.
Tax effect: Moderate but episodic.
Implication: Save Roth for later but use traditional withdrawals in high-deduction years.
Estate and bequest goals
Because inherited Roth IRAs are tax-free to beneficiaries, keeping Roth balances intact often maximizes family rather than individual after-tax wealth.
Retirees focused on legacy value may therefore prefer to spend traditional assets first and preserve the Roth for heirs.
Timing: End of life and estate planning horizon.
Tax effect: Moderate to high depending on estate size.
Implication: Save Roth for later to maximize family after-tax wealth.
RMDs, Medicare surcharges, and Social Security taxation can punish Roth-first retirees later.
Married vs. single filing changes brackets and creates the “widow’s penalty.”
Mortgage debt, healthcare costs, and estate goals can all shift which account is best to spend first.
Conclusion
In a perfect lab setting—steady inflation-adjusted spending, fixed tax rates, no RMDs—the difference between “Roth-first” and “Roth-last” nearly disappears.
But real life isn’t a lab. Taxes change, spouses die, and spending patterns evolve.
That’s when timing really starts to matter—and where future modeling can show how everyday realities reshape the retirement withdrawal puzzle.
Authors Note: David Bernstein, a retired economist, is the editor of the blog Economic and Policy Insights, a blog that includes frequent posts about the consequences of student debt.If you’d like to support this work — and receive premium posts, working drafts, and early access to new analyses — I’m offering two introductory options:
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